IT Salary Compression, AI Trust Decline, and Vendor Consolidation Impact MSP Strategies

February 23

14 mins

Episode Description

Recent data highlights a growing disconnect between technology spending and measurable business outcomes, with small business optimism softening and widespread skepticism about the benefits of artificial intelligence. The transcript cites an 80% rate of firms seeing no noticeable AI-driven productivity improvements, while trust in technology companies, particularly AI vendors, has declined globally according to the Edelman report. For MSPs, this presents a risk of credibility gaps, especially for those selling AI solutions without corresponding outcome data, as client trust and spending habits grow more discerning in the face of unfulfilled promises.

Further context is provided by economic indicators showing a resilient U.S. economy, yet persistent challenges for small businesses. The NFIB Small Business Optimism Index has dropped slightly to 99.3, with insurance costs and labor quality as major pain points; only 16% of business owners expect higher sales. At the same time, IT professionals face salary compression—median IT salaries fell from $145,000 in 2023 to $115,000 in 2024—despite a severe shortage of skilled cloud, AI, and infrastructure talent, as less than 10% of hiring managers are confident in filling in-demand roles.

Additional market pressures include rising technology budgets—three-quarters of CFOs anticipate larger tech allocations, but headcount increases are slowing and tech spending faces a widening affordability gap due to sector-specific inflation outpacing budget growth. Vendor-specific developments, such as Western Digital exhausting hard drive capacity for 2026 and Enable reporting 12.8% revenue growth alongside ongoing losses and a 65% stock decline since 2021, illustrate structural risks. Vendor rationalization and strategic uncertainty are likely outcomes for MSPs relying heavily on underperforming partners.

Key takeaways for service providers and IT leaders include the need for caution in messaging and solution positioning: outcome data and defensible value propositions are essential when advocating AI or cloud services. Salary data should be weighed against demand-side evidence to avoid retention failures. Finally, dependency on vendors with deteriorating financial outlooks heightens operational risk; providers should proactively assess alternatives and align with financially sustainable partners to reduce exposure during vendor consolidation cycles or market restructures.

Four things to know today

00:00 AI Productivity Gap Widens as Trust Drops — MSPs Selling Outcomes They Can't Measure Face CFO Audits

04:51 IT Median Salary Dropped 20% in 2024, But Only 7% of Hiring Managers Can Fill AI and Cloud Roles

07:26 IT Inflation Hits 6.9% as CFOs Concentrate Spend; Western Digital Fully Booked Through 2026

10:28 N-Able Beats Revenue, Misses Earnings as 2026 Growth Guidance Drops to 8–9%